Samsung Electronics’ entry into the electric auto parts business is forecast to intensify competition for building self-driving cars in Korea between automakers and IT heavyweights

Published : Dec 13, 2015 - 18:06

Updated : Dec 13, 2015 - 20:42

The announcement that Samsung Electronics would set up a separate team to develop electric car components used for Internet-connected and self-driving cars last Wednesday has ignited an interesting debate on whether the nation’s tech giant will try to build a car again or not.

Samsung had entered the automotive business by setting up Samsung Motors in 1994, but exited from the sector in 2000 after selling the auto arm to French automaker Renault due to mounting losses.

“It is a possible scenario for Samsung to consider producing a car again in the long term in that dependency of future cars in an era of driverless mobility on electric parts will be higher than ever before,” a source who is close to the matter said on condition of anonymity.

Samsung Electronics vice chairman Lee Jae-yong

Currently, automakers depend on electric parts for 20 to 40 percent of the entire components used to build a car, but the dependency ratio will soon exceed 50 percent as they are electrifying vehicles at a fast pace, market data said.

“All-electric self-driving cars, (packed with electronic sensors and displays), are no longer a futuristic idea,” said Kim Phil-soo, an automotive engineering professor at Daelim University.

The electrified cabin of Rinspeed’s fully autonomous Budii concept car, based on the BMW i3. The Swiss design-and-engineering company debuted the utopian smart car concept at the Geneva Motor Show in March. Rinspeed

“Considering the fact that global automakers, including Hyundai Motor, and tech giants like Google are in fierce competition to secure hegemony in the autonomous car sector with explosive growth potential, it is somewhat late for Samsung to create the auto business team in its organizational chart.”

According to BI Intelligence, a global market researcher, about 10 million driverless cars are expected to be rolled out by 2020.

Hyundai Motor vice chairman Chung Eui-sun

Another South Korean tech giant LG Electronics jump-started the electric auto parts business earlier than Samsung by setting its auto business team two years ago.

Koo Bon-joon, vice chairman of LG Electronics, will be responsible for strengthening competency of the firm’s new growth engine on a group level from next year, as he will lead the new growth engine development division at LG Corp., the holding company of the conglomerate.

When it comes to driverless car manufacturing by tech giants in Korea, however, industry watchers said Samsung could stand ahead of LG Electronics mainly because of its extensive technological spectrum in this area, including chip for an electrified car, a key component for driverless car manufacturing.

LG Electronics vice chairman Koo Bon-joon

“In the short term, Samsung’s newly-created auto team will focus on developing such parts as information and entertainment systems for existing automakers to reap immediate results, but it could expand its business domain into future car manufacturing for consumer business, where Samsung knows how to make a success story,” the source said.

Market watchers said the entry of Samsung into the car parts sector will intensify competition for autonomous car-related businesses in Korea.

Not just tech rivals like LG, but Hyundai Motor too may be pressed by Samsung’s recent move.

On the wake of Samsung’s organizational reshuffle last week, the nation’s top automaker said it is considering developing its own computer chips and sensors used in autonomous driving to gain fuller control over the race for future cars.

Hyundai is currently in the development phase of cars with a high degree of automation. It applied part of its autonomous technologies to the newly launched full-size sedan EQ 900, the first model of its premium brand Genesis.

“The future car-related business has become a test bed for young business tycoons of the nation’s tech and auto giants to prove their management capability to the market,” industry sources said.